Problem 20 During the annual audit of Garcia Company, you encountered the following account, entitled “Receivables and Payables”: Debit Credit Due from customers P156,000 Payable to creditors for merchandise P62,000 Note receivable, long term 80,000 Expected cumulative losses on bad debts 4,000 Due from employees, current 2,200 Cash dividends payable 24,000 Special receivable, dishonored* 22,000 Accrued wages 2,400 Rent received in advance 1,600 Insurance premium paid in advance 1,200 Mortgage payable 40,000 *Collection probable in 2 years. Compute the amount to be reported as trade and other receivables under current assets.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Problem 20
During the annual audit of Garcia Company, you encountered the following
Debit Credit
Due from customers P156,000
Payable to creditors for merchandise P62,000 Note receivable, long term 80,000
Expected cumulative losses on
Cash dividends payable 24,000 Special receivable, dishonored* 22,000
Accrued wages 2,400 Rent received in advance 1,600 Insurance premium paid in advance 1,200
Mortgage payable 40,000 *Collection probable in 2 years.
- Compute the amount to be reported as trade and other receivables under current assets.
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